Weighted Average Coupon
Definition
Weighted Average Coupon. (WAC). The weighted-average gross interest rates of the pool of mortgages that underlie a mortgage-backed security (MBS) at the time the securities were issued.
The WAC on a MBS is an important piece of Contractual Cash Flows information, that can be used to estimate the Prepayment Risk characteristics of the security. It is an important relative value tool in MBS portfolio management and analysis.
NB: A mortgage-backed security's current WAC can differ from its original WAC as the underlying mortgages pay down at different speeds. In the weighted-average calculation, the principal balance of each underlying mortgage is used as the weighting factor
Disclaimer
This entry annotates a FIBO Ontology Class. FIBO is a trademark and the FIBO Ontology is copyright of the EDM Council, released under the MIT Open Source License. There is no guarantee that the content of this page will remain aligned with, or correctly interprets, the concepts covered by the FIBO ontology.
| IsDefinedBy URI of an entity that is defined via an imported vocabulary. | https://spec.edmcouncil.org/fibo/ontology/MD/DebtTemporal/DebtPricingYields/index-en.html + |
